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Leo Economic Report

In: Business and Management

Submitted By tarcy
Words 646
Pages 3
Economic analysis
We will now use some financial ratios to analyze Lego A/S economic development from 2008 to 2011, thereby further knowing this company’s past performance and perspective. We will divide five respects to develop, which are profitability, earnings capacity, efficiency in the use of assets, liquidity, solvency. ( graphs and relative ratios please find the PowerPoint document of LEGO A/S economic development on attachment)
LEGO A/S ‘ financial information appears the profitability has developed good and stable from 2008 to 2010, but has a little bit down from 2010 to 2011. The level is however satisfactory, which is altogether primarily caused by the development in ROS(Return on sales).

* Earnings capacity:
As before noted that ROS increased stably from 2008 to 2010, but slightly dropped from 2010 to 2011. This situation cause by contribution margin increased from 2008 to 2010, then slightly downed from 2010 to 2011. Perhaps the raw material price go up, due to global economy is sliding. Another way, sales has increased, meanwhile costs also increased with sales. But sales increase by more than costs, especially in fixed costs, which increased by 73% when sales increased by 97%. So the capacity suit the sales development.
If LEGO wants to keep or enhance current earnings capacity it seems as if it should work to increase sales and / or decrease production costs so the contribution margin ratio will stop drop and increase again.

*Efficiency in the use of assets
Asset turnover ratio however it almost unchanged. That can be explained through two sides. One is the inventory turnover ratio dropped 10% from 2008 to 2009 which indicates that things are in inventory for a longer time period, but then it increased (9%) again from 2009 to 2011. Another one is the debtors turnover ratio increased 5% from 2008 to 2009, whereas greatly...

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